Correlation Between Summit Midstream and Crestwood Equity

Can any of the company-specific risk be diversified away by investing in both Summit Midstream and Crestwood Equity at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Summit Midstream and Crestwood Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Summit Midstream Partners and Crestwood Equity Partners, you can compare the effects of market volatilities on Summit Midstream and Crestwood Equity and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Summit Midstream with a short position of Crestwood Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Summit Midstream and Crestwood Equity.

Diversification Opportunities for Summit Midstream and Crestwood Equity

0.67

Correlation Coefficient

Summit Midstream  Crestwood Equity

Poor diversification

The 3 months correlation between Summit and Crestwood is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Summit Midstream Partners and Crestwood Equity Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crestwood Equity Partners and Summit Midstream is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Summit Midstream Partners are associated (or correlated) with Crestwood Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crestwood Equity Partners has no effect on the direction of Summit Midstream i.e., Summit Midstream and Crestwood Equity go up and down completely randomly.

Pair Corralation between Summit Midstream and Crestwood Equity

Given the investment horizon of 90 days Summit Midstream Partners is expected to under-perform the Crestwood Equity. In addition to that, Summit Midstream is 3.53 times more volatile than Crestwood Equity Partners. It trades about 0.0 of its total potential returns per unit of risk. Crestwood Equity Partners is currently generating about 0.05 per unit of volatility. If you would invest  2,649  in Crestwood Equity Partners on September 2, 2024 and sell it today you would earn a total of  293.00  from holding Crestwood Equity Partners or generate 11.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	37.47%
Values	Daily Returns

Summit Midstream Partners  vs.  Crestwood Equity Partners

Summit Midstream Partners

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Summit Midstream Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable essential indicators, Summit Midstream is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Crestwood Equity Partners

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Crestwood Equity Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Crestwood Equity is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Summit Midstream and Crestwood Equity

The main advantage of trading using opposite Summit Midstream and Crestwood Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Summit Midstream position performs unexpectedly, Crestwood Equity can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Crestwood Equity will offset losses from the drop in Crestwood Equity's long position.

The idea behind Summit Midstream Partners and Crestwood Equity Partners pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Fundamental Analysis module to view fundamental data based on most recent published financial statements.